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Building Healthy Communities in the 21st Century:

Presented at

Rural Community Planning and Development Think Tank University of Nebraska—Lincoln.

Lincoln, NE

April 1, 2011___________

Mark PartridgeSwank Professor in Rural-Urban Policy

The Ohio State University

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Outline1. Need to understand why places prosper if we

want to help them prosper: Compete or Retreat!• Regions compete nationally and internationally

• Rural Nebraskans have self-organized themselves into regions.• Not just North Platte vs Grand Island, but also North Platte vs

Beijing. • Regions that don’t rise to this competition in terms of being a

good place for business and a quality place to live will decline. • People, entrepreneurs, and investment will flow elsewhere.• This especially matters for rural areas

• Moral will be get the basics right, be patient and don’t be fancy for fancy sake.

Motivation--continued2. Too many communities skip the basics.

• We ‘want’ a quick fix!3. Jump on the latest fad w/o even knowing if

the previous fad worked.• Clean energy, ethanol, local foods,

immigrants, creative class, value-added manufacturing, biotechnology, clusters, tax incentives.

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Motivation--continued4. Rearview mirror: ‘Regain a historical legacy.’ In

Ohio, it’s manufacturing; in Western Nebraska farming, etc.

• They are great legacies, but 21st Century winners will differ from 19th & 20th Century winners.

• This does not mean that manufacturing or farming failed!—productivity growth means each worker is more productive than before. This should celebrated as I show below!

• Rural Myth—1950 rural Nebraska is today’s rural Nebraska w/o recognizing new opportunities.

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Let’s first beat up ‘bad’ policy• Bad Idea 1: Ignore economic fundamentals

and rely on gut hunches w/o foundation.• Evidence-based economic development policy is what

is needed, not:• Color graphics & facilitation replace economic reality• Wishful thinking & good intentions replace good ideas

• Bad Idea 2: We need a quick fix.• If it was easy, wouldn’t someone have already done it? • Truth is that it takes time to attract new knowledge

workers, entrepreneurs, & physical capital. • Five years is realistic for tangible effects.

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Losing Bad ideas

• Bad idea 3: Jump on the latest fads• Fad 1: Clean Energy—wind and bio energy.

– We need clean energy!, but is it a job creator? • The problem is that wind turbines are capital intensive

and require few permanent workers.• Subsidies take money from other gov’t programs that

could spur growth.• Don’t confuse clean energy policy with rural policy!

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Fad 1, Cont: Rural Example—SW Minnesota/NW Iowa

• Many politicians argue alternative/green energy is especially good for rural economic development. Rural economies would be more sensitive to the effects of any economic shock. – SW Minn and NE Iowa is a good case study. I

will show that alternative energy has not been a game changer when looking at their broad economy.

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Losing Bad ideas

• Bad idea 4: Rearview mirror-backward-looking• Keep doing the same thing over and over w/o

considering new opportunities.– Could result from a legacy industry becoming so

productive, fewer workers are hired– E.g., Ohio manufacturing.

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Rural Myth: It is still 1950!• Rural Myth—rural America’s prosperity solely

relies on natural resource sector.– This is a common media story—New York Times

—confuse the bucolic landscape with what the people do.

– Confuse sector prosperity with place prosperity.– My moral is healthy places will be a magnet for

healthy sectors and businesses.

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Moral!• Rural development is far more complex than

supporting sectors. – Note the contradiction in (say) farm or

manufacturing (etc) policy, farm or manufacturing competitiveness is producing more food/goods with fewer workers—

– Sector prosperity is not community prosperity!• Sector-policy often conflicts with place policy.

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What are the real of Rural Nebraskas?

• Policy should be based on reality—not myth.• The reality is that there are 3 rural NEs:

1)Amenity/recreation rich near mountains, lakes, oceans

2)Remote rural that is dependent on natural resource sectors—shrinking in size since the 1930s

3) Metro adjacent with commuting—big and growing

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15Source: U.S. Bureau of Economic Analysis, Regional Economic Information System. Available at www.bea.gov, accessed October 15, 2009.

U.S. Agricultural Employment Shares in Metropolitan & Nonmetropolitan Areas

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1970 1975 1980 1985 1990 1995 2000 20050

10

20

30

40

50

60

1969-2008 Percent of Nebraska Population that is Nonmetropolitan

Source: U.S. Bureau of Economic Analysis, Regional Economic Information System. Available at www.bea.gov, accessed March 18, 2011.March 2009 Metropolitan definitions.

In absolute terms 779,000 in 1969 to 742,000 in 2008

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1970 1975 1980 1985 1990 1995 2000 2005 20100

5

10

15

20

25

Percent farm employment (metro) Percent farm employment (non-metro)

Percent farm employment (NE total)

1969-2008 Nebraska Farm Share of Total Employment

Source: U.S. Bureau of Economic Analysis, Regional Economic Information System. Available at www.bea.gov, accessed March 18, 2011.March 2009 Metropolitan definitions.

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1970 1975 1980 1985 1990 1995 2000 2005 20100

5

10

15

20

25

30

35

40

Percent farm earnings (metro) Percent farm earnings (non-metro)Percent farm earnings (NE total)

1969-2008 Nebraska Farm Share of Total Earnings

Source: U.S. Bureau of Economic Analysis, Regional Economic Information System. Available at www.bea.gov, accessed March 18, 2011.March 2009 Metropolitan definitions.

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What is good strategy?• You don’t have to pick the next hot industry,

just be sure they want to be in your community. e.g.,Seattle 1978 and Microsoft

1.Recognize rural-urban interdependencies• In 1950, communities detached from neighbors• 21st Century communities are linked in webs

– Growth spreads out a hundred of miles from a city as small as 30,000

• If someone can commute, they can shop, utilize health care, participate in service organizations, etc.

• Regions share common interests and the gains should be exploited regionally. 21

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Plains States Engines of Growth

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Rural Depends on Urban for:

Urban Depends on Rural for:

Employment Labor Force

Private and Public Services Market for Private and Public Goods and Services

Urban Amenities Market for Urban Amenities

Market for recreation activities

Recreation

Market for agriculture products

Food Safety and Security

Demand for Environmental Stewardship

Natural Environment

Property taxes/land market Land for Residential and Industrial Expansion

Rural-Urban Shared Fates--cont• Economists contend that gov’t jurisdictions

should reflect common interests & spillovers.– Spillovers need to be minimized with a regional

‘authority.’ Avoid pushing costs onto other places.• Tax sharing of common economic gain to share costs• Environmental costs and sprawl• Infrastructure is inherently regional

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Example of Action• Regions that realize they are linked will have a

competitive advantage in the global economy.– Lower taxes, better infrastructure, better public

services, stronger economic development– Just being a little more competitive will shift capital

from around the world at the click of a mouse.• Regionalism is the real sleeping giant for rural

communities for sustainability.

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Regionalism—continued • Regionalism stops the “city” from keeping all

of the gains while ‘remote’ communities lose– Currently, (say) Lincoln keeps all of its tax

revenues from the region’s shoppers. Regional approach would disperse some back to the country for regional projects.

• Requires developing best practices and building leadership in local government.• First step requires a change in state law to

enable more innovative local approaches.

Good Strategies—cont.2. 21th Century will belong to places that use

their knowledge to leverage their assets. • Rural communities should be attractive to knowledge

workers • Quality of life, pleasant environment, sustainable

development, good public services—this is good economics!

• Attract return migrants in their 30s after they have seen bright lights. [Retiree migration is more problematic.]

• Rural US counties with greater shares of knowledge workers grow faster than metro areas (even metros with knowledge workers) and they grow about twice the rate of rural counties with low shares. • Source: see the appendix for a supporting chart

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Good Strategies--cont3. Business retention and expansion is

better than tax incentives for outside investment. Building Entrepreneurship!• Treat all businesses alike.• If you build a good climate for investment, your

own businesses will thrive and STAY!• Small businesses buy locally.• Innovation comes from small firms. It is better products

and lower costs. Not the next biotech invention. Along with good human capital, you can adopt the next innovations.

• Entrepreneurship is critical. 28

0 250 500 750 1,000125Miles

Nonfarm Self-Employment Share of Total Employmnent

1.90 - 15.00%15.00 - 25.00%25.00 - 35.00%35.00 - 45.00%45.00 - 70.00%

.

Data source: Bureau of Economic Analysis

Minimum = 2.94

Median = 22.39

Maximum = 68.73

2008 Nonfarm Self-employment Share of Total Employment

Good Strategies—contBusiness Retention and Expansion• Take advantage of farm entrepreneurship.• Today’s successful farmer:

• 1. Tied to land—not outsourcing to China.• 2. Has experience managing medium sized

business and has developed entrepreneurship.• 3. Understands futures markets, global markets,

exchange rates, knows how to manage capital.• 4. Has financial wealth.

• This asset is not typically utilized!30

Conclusions:What have we learned?

• Drop the silly fads and focus on the real fundamentals that make your community attractive to firms and workers.

• Lose that rearview mirror and focus on the 21st Century.

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Conclusions• Focus on realities such as emerging regions

that the people have self formed—the politicians lag what the people are doing.

• Adopt good strategies that don’t require perfect foresight. – You need to make it such that the best firms

want to be in your community.• Education & entrepreneurship are keys.• Farmers are underutilized as potential

leaders of entrepreneurship.32

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Thank you

Presentation will be posted at The Ohio State University, AED Economics, Swank Program website:

http://aede.osu.edu/programs/Swank/ (under presentations)

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Appendix Slides

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Total carbon emissions per kWh generated by energy source

0

0.5

1

1.5

2

2.5

2.082

1.244

0.0340.036000000000

0002 0.092 0.0280.078000000000

00020.030000000000

0002

Life Cycle Emission Rates (lbs CO2/kWh)

Note: Life cycle emissions rates includes the total aggregated emissions over the life cycle of the fuel to include extraction, production, distribution, and use.

Source: Meier, 2002. http://cpsenergy.com/files/STP_Univ_Wisc_energy%20_comparison.pdf

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Energy production costs by energy source

Coal Natural Gas Nuclear Hydroelectric Biomass Wind Solar Geothermal0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

10.04 8.31 11.90 11.99 11.1014.93

39.61

11.57

2016 U.S. Average Levelized Cost (2008 cents/kWh)

Note: The average levelized cost is the present value of all costs including building and operating the plants. Source: US Department of Energy, 2010. http://www.eia.doe.gov/oiaf/aeo/pdf/2016levelized_costs_aeo2010.pdf

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Estimates of the number of jobs required to produce a kWh by energy source

Coal Natural Gas

Biomass Low

Biomass High

Wind Low Wind High Solar Low Solar High0.00E+00

2.00E-07

4.00E-07

6.00E-07

8.00E-07

1.00E-06

1.20E-06

1.40E-06

1.15E-07 1.08E-07 8.90E-08

3.24E-07

8.11E-08

3.18E-07

8.46E-07

1.21E-06

Average Facility Employment (Jobs/kWh)

Source: Kammen, et al., 2004. http://www.unep.org/civil_society/GCSF9/pdfs/karmen-energy-jobs.pdf

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Effects of Replacing Coal with Wind

• Cost Effects of Replacing 25 percent of coal with wind

• Labor Effects of Replacing 25 percent of coal with wind

2009 Total kWH 2009 Total Coal

kWH Changes in Total Emissions (lbs)

Total Annual Cost (Millions)

Total Cost Per Household (dollars/year)

US 3,951,117,000,000 1,764,486,000,000 -906,063,561,000 $21,571 $191.93 MI 101,642,000,000 67,822,000,000 -34,826,597,000 $829 $215.66 OH 135,949,000,000 113,824,000,000 -58,448,624,000 $1,391 $308.78

Total Coal Jobs

Based on Total kWh Employment Change (low)

Employment Change (high)

Employment Change Share (low)

Employment Change Share (high)

US 203,440 -15,107 89,634 -0.012% 0.068% MI 7,820 -581 3,445 -0.015% 0.089% OH 13,124 -975 5,782 -0.019% 0.114%

3939

Great diversity in rural America:

Population Growth from 1960 to 2008

0 160 320 480 64080Miles

Population Growth from 1960 to 2008(%)

133.9 - 811.595.6 - 129.552.9 - 88.036.8 - 43.426.2 - 35.8-22.5 - 22.3 Map Created on November 16, 2009

Mean=89.1

Median=43.4

414141

1990/91-2006 North American Population Growth

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Context for Firm Strategy

and Rivalry

Demand Condition

s

Related and

Supporting

Industries

Factor Condition

s

Conceptualizations of Competitiveness

The Porter Diamond Framework (Porter, 1998)

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NCC Competitiveness Pyramid

Source: National Competitiveness Council

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Wyoming: Alberta on Steroids!

14.43%

3%

7.13%

39.6%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

WY 1981 mining share

WY 1981-2004 population growth

AB 1981 mining share

AB 1981-2004 population growth

WY’s greater natural resource intensity did not produce faster growth

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2000-2007 Population Growth